Wednesday, the Congressional Budget Office (CBO) released a report on the federal debt limit (also referred to as the “debt ceiling”).
The Temporary Debt Limit Extension Act, enacted in February 2014, suspended the nation’s statutory debt limit through March 15, 2015. When the debt limit goes back into effect on March 16, it will be automatically raised to cover cumulative borrowing that took place during the suspension period. At that point, the U.S. Treasury will then have a number of tools, also known as “extraordinary measures,” at its disposal to avoid breaching the debt ceiling for a period of time.
The CBO estimates that these measures will be exhausted in October or November of this year, though this is subject to change depending on to what extent the timing and size of federal revenues and outlays differ from the CBO’s current projections. Congress will need to act to raise the debt limit before these extraordinary measures are exhausted in order to ensure the federal government is able to fulfill all of its funding obligations. Given that the deadline for raising the debt limit is projected to be this fall, the debate to raise the debt ceiling is likely to coincide with lawmakers’ negotiations over fiscal 2016 appropriations.
Another shutdown debate is expected with the federal fiscal year ending September 30th, 2015.